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Palo Alto Networks reported adjusted earnings per share of $1.46, exceeding analysts’ expectations of $1.30, and revenue of $1.98 billion, slightly surpassing the anticipated $1.97 billion. Net income for the quarter stood at $1.7 billion, or $4.89 per share, a substantial increase from $84 million, or $0.25 per share, recorded in the fiscal second quarter of 2023.
However, the company revised its full-year outlook, anticipating total billings between $10.1 billion and $10.2 billion, down from the previously guided range of $10.7 billion to $10.8 billion. Similarly, it adjusted its revenue forecast to a range of $7.95 billion to $8 billion, compared to the earlier projection of $8.15 billion to $8.2 billion.
During a conference call with analysts, CEO Nikesh Arora attributed the revised guidance to a strategic shift aimed at accelerating growth, migrating and consolidating platforms, and asserting AI leadership. Arora acknowledged the challenges associated with this transition, particularly anticipating difficulties with some customers.
The company’s guidance for the upcoming quarter also fell short of consensus estimates, with revenue expected to range between $1.95 billion and $1.98 billion, below analysts’ expectations of $2.04 billion.
The revised estimates mark a notable reduction in growth projections, with full-year billings growth now forecasted between 10% and 11%, down from the initial guidance of 16% to 17%. Likewise, revenue growth expectations have been revised to between 15% and 16%, compared to the earlier forecast of 18% to 19%.
Despite the downward adjustment in guidance, Palo Alto Networks emphasized its commitment to leveraging its AI leadership strategy to navigate the evolving cybersecurity landscape. However, the stock plunge underscores investor apprehension regarding the company’s ability to execute its revised growth initiatives amidst a competitive and rapidly changing market.